No Pain No Gain!

Cliches are trite because they are true! And that ‘no pain no gain’ that applies to exercise, can apply equally to your finances. Although not everyone reading this article has a ‘painful’ financial situation, my experience has shown me that this subject is relevant to a large proportion of people. And with Pesach, arguably one the most expensive chagim of the year, looming ahead, read on and apply the tips in this article for an improved financial position when the chametz is back in your cupboards once more.

Often when making financial decisions, we focus finding a solution to a very specific and immediate problem. The Cohens (the names and identities have been changed) were a typical family who came seeking help with an immediate cash flow issue. They had large monthly payments to multiple gemachim and bank loans that were getting increasingly difficult to pay every month, without running up more and more debt. We discussed various options including refinancing their mortgage and taking out an additional sum to cover all their outstanding debt. My general response to anyone considering this type of refinancing is that until they get their monthly cash-flow under control, the refinancing is bound to fail.

However, despite my reservations they chose this immediate option and, over a year later, were back in debt searching for the latest Band-Aid solution to their problem. Why couldn’t they acknowledge their reality and see that the real issue, as I explained to them, was the fact that they insisted on living beyond their means? When people are consistently spending more than their earnings, even if it’s only a small amount, eventually they’ll find themselves in debt. A monthly deficit of only 1,000 NIS will still create 12,000 NIS of accumulated debt at the end of the year. So why did the Cohen’s think they could solve their problem with simple refinancing? Because whenever we are faced with difficult decisions, the easiest and simplest route is generally the one chosen. We fixate on the immediate reduction of pain to “solve the problem”. It’s much easier to ignore the longer term impact of our decisions as long as we can find a short term solution to our current predicament.

When deciding on whether we spend on current needs versus future needs, it’s much easier to focus on the current needs because they are immediate, concrete and real. If we need to put off buying something today, or saying no to a child, we’ll feel it now and will need to live with the consequences. But living within our means or saving for retirement/ education/weddings (you fill in the blanks) is much more difficult, because accumulating those crucial savings does not provide you with any immediate relief from your current painful situation.

The problem with this approach is that often by the time you realize that you have a problem, it’s much more complicated to solve. That’s why more and more seniors are working longer and postponing retirement whenever possible. They have no choice if they don’t want to spend their retirement years in poverty.

The key is to assess your current and future needs. When you have an accurate picture of your future needs, it helps you to be more proactive in saving towards these future needs and/or wants. But no pain, no gain. You need to realize that today’s comfort is tomorrow’s discomfort, and vice versa.

Practically, how can you apply this concept now? When making decisions about your monthly budget, ensure that you’re taking into account not just what you need to spend today or this month, but include future expenditures including long term savings. Yes, Pesach is an expensive holiday and our costs may be significantly higher than other months. But you still need to be able to afford it. If you can’t afford it, learn to say no, and live without it

Do you want your money to go towards a vacation during Pesach, extra daycare before the Chag, or painting your house before you clean? It’s much easier to allocate your money when you have a clear sense of your priorities. So take the time to sit down and discuss with your spouse, and children if they are old enough, what you want to do with your money. Include as many family members as possible in the decision-making process in order to ensure maximum “buy-in” from all concerned.

Prioritize and plan, identify your needs versus wants, and you will be well on your way. Creating debt in order to enjoy the Chag might seem like a viable option and for many, the only way of getting by. But higher debts will increase your stress in the long run, as you dig yourself into an even bigger financial hole. Avoid debt unless you are sure that you have the means to pay it back.

Pesach is the festival of freedom – turn this one into both a financially and spiritually liberating experience. Chag kasher vesameach.